Motorola’s strong suit may show weakness

A slow start for Motorola Inc.’s new product line and generally weak demand in the North American handset market this holiday season may impact Motorola’s fourth-quarter results, according to Cowen analyst Matthew Hoffman.
The financial analyst said channel checks show that Motorola’s market in the Americas has softened since November and that the vendor’s North American GSM channels appear to have excess inventory. This will likely impact fourth-quarter results and the outlook for next year’s first quarter, Hoffman said.
Hoffman dropped his estimate for Motorola’s volume shipments for the year by 2 percent, to 287 million units from 292 million, based on softness in Latin American and North American markets. Hoffman also lowered projections for European sales of the Krzr to 2 million units at $350 in fourth quarter from his September forecast of 3 million to 4 million units at $250 to $300.
Hoffman cited the “age” of the Razr, iDEN “slipping” and new products “providing less of a lift . than originally anticipated” as cause for a new appraisal of Motorola’s momentum in its home, North American market.
“Top North American GSM carriers are putting programs in place to reduce inventory well before the holiday season is over,” Hoffman wrote. (Price drops!) The analyst said that Motorola’s strong position in Cingular Wireless L.L.C.’s portfolio is being challenged by Samsung Electronics Co. Ltd. and LG Electronics Co. offerings.
On the CDMA side, however, Motorola continues to perform according to expectation and its $50 Razr offers through Verizon Wireless and Alltel Corp. has eaten into Samsung and LG’s strength in CDMA, according to Hoffman.